Fees are the silent killers of investment returns. Many investors are only dimly aware that fees even exist, but over the long term, fees can cause serious damage to a portfolio.
Consider that $100,000 invested at 8 per cent for 25 years will grow to $684,847. Take off just 2 per cent in fees and that same $100,000 will grow to $429,187 – a difference of $255,660.
Studies show that about half of mutual fund investors have no idea they’re paying any fees at all. What’s more, those that are aware of fees often believe that higher costs are the price for higher returns, when in fact keeping costs low is the key to successful investing.
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Investor Education on mutual funds:
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With that in mind, today’s Investor Clinic provides a comprehensive list of the many fees and other costs investors face. This information comes from the Investors-Aid Guide to Protecting Investment Returns, by Garth Rustand, a former investment adviser who runs the Vancouver-based Investors-Aid Co-operative of Canada.
“To manage your investment costs, you need to know what they are. The investment industry charges at least 18 different types of fees, and taxes add a 19th,” Mr. Rustand writes.
“Some costs are transparently disclosed on investors’ statements, but many are hidden. Some are non-negotiable, while others can be waived upon request.”
See how many of these costs you are paying:
1. Stock-trading commissions. When you buy or sell a stock or exchange-traded fund, you pay a commission ranging from less than $10 at some discount brokers to $150 or more at full-service firms. The more you trade, the higher your costs. Mutual funds that trade a lot also have higher expenses.
